I overheard someone in the cafeteria at work the other day saying they do not contribute to their retirement account. I could hardly believe my ears. This person seems to be experienced enough to know this inaction would cost them some serious money. Could it really be these concepts I consider in the realm of ‘common sense’ are not followed by the entire workforce?

It is common for employers to match a certain percentage of your pay that you contribute to your retirement account. I often hear “free money” thrown out to describe the match. You really need to consider it part of your compensation package for selling your valuable time, talent, and energy to a company.

How Much Does MAX OOP Get Matched?

As a benefit in 2019, my employer will match dollar for dollar (or even cent for cent) up to 3% of my salary on retirement contributions. So for every dollar I make, I can put 3 pennies into my 403(b) and my employer will also put 3 pennies into the same account. Assuming I finish out the full year of work in 2019, this will work out to about a $3,025 match for Max OOP.

Think of the match like roulette, but in this game, you know AHEAD of time the ball is going to land on red every single pay period. You put a percentage of your paycheck on red and win a full match EVERY spin. The only catch is – usually, you actually have to play every pay period to get your match.

There are retirement matches out there MUCH higher than 3% but this seems about the market rate for healthcare workers. I hear Philip Morris International has a solid retirement match (rumored at 12% of salary). So if you want to join big tobacco and its contribution to our overall healthcare cost, that could be your best ticket.

Most companies increase the match percentage with years of service as you commit more of your limited time on earth to a company. I never thought of these match increases material enough to have the golden handcuff effect. Easy sacrifice for early retirement or a sabbatical.

Minimum Contribution To Get The Match

My current company requires me to put at least 3% of EVERY paycheck into my retirement account in order to get the full match that pay-period. Since I get paid over 26 pay periods, my match will come out to about $116.45 per paycheck. I will need to put in a minimum of $116.45 on red EVERY paycheck in order to secure my winnings.

In other words, if I front-load the full $3,025 into my retirement account on my first check, they don’t go ahead and give me the $3,025 match all at once. They want the match spread out nice and evenly throughout the year. This seems like a pretty common strategy by employers to help retain (lock-in) worker bees for the full year.

So this is where we need to be careful with front-loading. If you front-load your entire $19,000 during your first several paychecks, you may be leaving your match on the table for the rest of the year. I am strategically leaving a little extra room (5%-6%) of my check to ensure I capture the match for the rest of 2019. This gives me some flexibility in case I see an unexpected bump in pay or leave for another job with a more generous matching program. If I take a sabbatical and leave work early in 2019 I will up my contribution on my last check to make sure I at least get the full $19,000 in the account.

My current employer requires contributions to be big ’round’ percentages. Not as easy as selecting specific contribution amounts but luckily I am married to a math teacher.

This is likely how it will look for 2019 for Max OOP:

Look at that, Max OOP forgot to front-load 1/4/2019! And you thought I was fully optimized. Slacker.

So by the end of 2019, between maxing out my 403(b) retirement account ($19,000) and the match ($3,025), I will have put away $22,025. Since Mr. and Mrs. Max OOP land in the 22% tax bracket, taking this $3,025 retirement match through my qualified retirement account defers another $666 in taxes from Uncle Sam. This match will be dollar-cost-averaged into over 500 of the largest companies in America for 26 pay periods.

Max Out of Pocket for $3,025 Match = 2,080+ hour annual time commitment netting about $1.45 per hour.

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